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Aziz V. Hamzaogullari is something of a fixer. In his three years at the helm of the
Loomis Sayles Growth
fund, he's turned the once-flagging fund around, steadily improving its performance—bringing it up from the bottom of its category, to beating 73% of its competitors over three years, and 85% in the past year.

Hamzaogullari, 44, joined Loomis Sayles from Evergreen Investments, where he similarly overhauled its underperforming Large Company Growth fund. (All Evergreen funds were absorbed by Wells Fargo in 2009.)

This fixer's strategy is borrowed from his late Uncle Cahit, who ran a textile exporting business in Hamzaogullari's native Turkey. His uncle would regularly visit his suppliers to evaluate their businesses and walk the factory floors to see how their operations ran. Likewise, Hamzaogullari puts management under a microscope. Loomis Sayles Growth (ticker: LGRRX) owns just 35 stocks—and Hamzaogullari has visited each company. He only buys and sells a few companies a year, far less than the average large-company fund, which turns over 70% of its portfolio every year.

Aziz Hamzaogullari picks stocks that promise robust growth but are currently trading at a discount.
Jason Grow

He expects corporate leaders to stick around at least as long as he does, and is critical of companies with revolving doors at the top. "The average CEO only stays on the job for four years," he says. He also looks for companies that are increasing cash flow, making them better able to withstand a downturn—though there hasn't been much in the way of that in the past three years. In that time, the Growth fund has kept pace with the S&P 500's total return of 19%, while being flooded with new cash. The fund's assets, which had been nearly obliterated before Hamzaogullari took over, have quintupled to $549 million. He and the team he brought from Evergreen manage the Growth fund along with the Loomis Sayles Large Cap Growth and All Cap Growth institutional portfolios, which together amount to $6.6 billion.

Despite his obvious mandate for growth, Hamzaogullari takes a surprisingly value-oriented perspective when scrutinizing potential investments. Sure, he looks for companies with a sustainable competitive advantage, good profitability, and quality management. But he only buys stocks that are trading at a 40% discount to his estimate of the company's intrinsic value. "I'm not just going for the upside," he says. "I want to minimize the downside risk, too."

That orientation toward deep value hidden within growth sectors has led him to a slew of beaten-up technology stocks recently. Not only are many technology companies trading at big discounts to their intrinsic value, they tend to have the long-term, high-quality management he looks for. For instance, Hamzaogullari has been following
Oracle ORCL -1.476266182148535%Oracle Corp.U.S.: NYSEUSD43.38
-0.65-1.476266182148535%
/Date(1425414388528-0600)/
Volume (Delayed 15m)
:
6359095
P/E Ratio
17.774590163934427Market Cap
193351891905.069
Dividend Yield
1.106755821996772% Rev. per Employee
318205More quote details and news »ORCLinYour ValueYour ChangeShort position
(ORCL) for two decades, and likes how CEO Larry Ellison thinks in 10-year increments and keeps a big stake in the company. Hamzaogullari says that Oracle is already benefiting from the growth in global demand for data storage and enterprise software, and that the company's investments in several software companies that give it more of a foothold in cloud computing will drive Oracle's cash flow at rates in the high-single-digit to low-double-digits.

Free cash flow is a key metric, Hamzaogullari says, because it is the best indication of whether a company can pay its bills and finance its growth. "The free-cash-flow number is free of accounting gimmicks," he says. He wants to see a free-cash-flow growth rate of at least twice global gross domestic product, a standard measure of sustainable growth. And that growth should be sustainable for at least five years.

Amazon.comAMZN -0.3046764595298907%Amazon.com Inc.U.S.: NasdaqUSD384.48
-1.175-0.3046764595298907%
/Date(1425414380439-0600)/
Volume (Delayed 15m)
:
1375297
P/E Ratio
N/AMarket Cap
179092011988.82
Dividend Yield
N/ARev. per Employee
577469More quote details and news »AMZNinYour ValueYour ChangeShort position
(AMZN) CEO and founder Jeff Bezos has been able to expand his company faster than the spread of global e-commerce. "Amazon has smoked the brick-and-mortar crowd," Hamzaogullari says. "It has a genius for providing convenient access to products at a good price anywhere." His favorite example is personal: Amazon was able to deliver his favorite jasmine tea to the door of his Cape Cod rental, saving him a trip to the post office a mile away or a two-hour drive to his supplier in Boston.

In the past five years, Amazon's revenue has tripled as the rest of the e-commerce industry languished in the low teens, and global retail sales had just single-digit revenue growth. Hamzaogullari expects the company will achieve free-cash-flow growth in the mid-teens over the next five years.

Loomis Sayles Growth

Total Returns*

1-Yr

3-Yr

5-Yr

LGRRX

23.8%

18.0%

5.3%

S&P 500

20.9

18.0

7.4

% Of

Top 10 Holdings

Ticker

Portfolio**

Google

GOOG

6.0%

Cisco Systems

CSCO

5.8

Amazon.com

AMZN

5.7

Visa

V

5.2

Oracle

ORCL

4.2

Qualcomm

QCOM

4.2

Zimmer Holdings

ZMH

4.1

Danone

DANOY

4.0

Lowe's Cos.

LOW

3.8

United Parcel Service

UPS

3.6

Total:

46.6%

*All returns are as of 8/15/13; three- and five- year returns are annualized. ** as of 6/30/13. Sources: Morningstar, Loomis Sayles

TOP HOLDINGGoogle GOOG 0.28879476318829417%Google Inc. Cl CU.S.: NasdaqUSD572.99
1.650.28879476318829417%
/Date(1425414385268-0600)/
Volume (Delayed 15m)
:
1094704
P/E Ratio
28.20090992978145Market Cap
390118128469.246
Dividend Yield
N/ARev. per Employee
1228170More quote details and news »GOOGinYour ValueYour ChangeShort position
(GOOG), Hamzaogullari says, is changing the way the advertising industry works. Advertisers are using Google Ads at the expense of print and television ads to attract consumers who spend more time online. Google's ad revenue represents about 5% of the $600 billion to $800 billion global advertising market—a figure bound to increase. Google could enjoy free-cash-flow growth in the high teens over the next few years.

The routers, operating systems, and voice-over-IP products
Cisco Systems CSCO -2.1033454786353096%Cisco Systems Inc.U.S.: NasdaqUSD29.555
-0.635-2.1033454786353096%
/Date(1425414387711-0600)/
Volume (Delayed 15m)
:
21276483
P/E Ratio
17.497041420118343Market Cap
150640842257.249
Dividend Yield
2.8407169428474806% Rev. per Employee
649402More quote details and news »CSCOinYour ValueYour ChangeShort position
(CSCO) produces are the backbone of the Internet and the increasing popularity of cloud computing. "We estimate that bandwidth capacity will grow more than 20% a year over the next five to 10 years," he says.

Visa V -0.9736246361709009%VISA Inc. Cl AU.S.: NYSEUSD275.5805
-2.7095-0.9736246361709009%
/Date(1425414386760-0600)/
Volume (Delayed 15m)
:
1463994
P/E Ratio
30.628846838032555Market Cap
170842396978.727
Dividend Yield
0.6969448045124272% Rev. per Employee
1360950More quote details and news »VinYour ValueYour ChangeShort position
(V) also has a difficult-to-replicate business model. "Over the past five years, which included a severe global recession, global personal consumption expenditure has grown approximately 4.5%," Hamzaogullari says. "But Visa has grown its global payments volumes 11%" as more people become comfortable with electronic payments. Visa has multiyear contracts with more than 14,000 financial institutions, which means banks and retailers are not about to jump to a competing card issuer any time soon. Visa already has a 15% share of global electronic payments, which only account for a third of the total global payments market. And as Visa achieves scale in new markets, it should see expanding margins and faster cash-flow growth.

Yogurt-maker
Danone's
DANOY -0.18799710773680406%Danone S.A. ADSU.S.: OTCUSD13.804
-0.026-0.18799710773680406%
/Date(1425413456524-0600)/
Volume (Delayed 15m)
:
199804
P/E Ratio
27.54951270625395Market Cap
44542802256.7991
Dividend Yield
2.8592436974789917% Rev. per Employee
266992More quote details and news »DANOYinYour ValueYour ChangeShort position
(DANOY) pursuit of emerging markets (where almost 50% of its revenue is generated) is paying off as consumers there shift to packaged food products that are more healthy and nutritious. "Emerging markets represent 80%-85% of the global population but just 50%-70% of the global volumes in Danone's market," Hamzaogullari says, adding it should benefit from its shift to baby and hospital nutrition. Danone could see its free cash flow expand at a double-digit rate.